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A decade from now, developers of mega oil projects offshore Norway could be competing against similarly large projects offshore Brazil thousands of miles away.
Both may be aiming for the highly coveted, energy-hungry Asian market.
Although Asia-Pacific region energy production is forecast to rise by 52%, consumption should grow by 60%, according to BP’s Energy Outlook 2035. Gas will be in highest demand, followed by oil and coal.
Enter megaprojects flowing oil from the Atlantic Basin offshore Brazil and offshore Norway, which are expected to add about 3.8 million barrels per day (MMbbl/d) to the world’s crude oil supply by 2025, according to analysis released May 12 by consultancy Wood Mackenzie.
Off the coast of Brazil, state-run Petrobras said the Santos Basin Tupi Field alone is estimated to hold between 5 and 8 billion barrels of oil equivalent (Bboe).
Tupi is only one of many discoveries the company has discovered and is working to develop below layers of salt that can be as much as 2,000 m thick.
Petrobras plans to spend more than half of its $82 billion investment budget through 2018 on presalt activities.
As with companies worldwide, Petrobras’ operations have been impacted by lower than usual oil prices. The company is facing additional pressure related to fallout from a corruption scandal and a mountain of debt.
Nevertheless, the company continues to grow light oil production from presalt assets.
“From 2010 to 2014, the average annual daily production from the pre-salt grew almost 12 times, from an average of 42,000 barrels per day in 2010, to 492,000 barrels per day in 2014,” Petrobras said.
“This currently represents approximately 20% of our total production, and in 2018 it is expected to reach 52 percent of the company's oil production.”
Wood Mackenzie forecasts Brazil’s presalt megaprojects will produce 3.2 MMbbl/d by 2025.
Across the Ocean, Statoil is not to be taken lightly. The company’s recoverable resources are estimated to be between 1.7 Bboe and 3 Bboe in Statoil’s massive Johan Sverdrup.
Production start-up is set for year-end 2019 from a reservoir at a depth of 1,900 m. Statoil said oil from the field, located on the Utsira Height in the North Sea, will be piped to the Mongstad terminal in Hordaland.
The first of the four-phase project will cost an estimated NOK 117 billion (US $15.6 billion).
“When Johan Sverdrup production peaks in 2024, total heavy crude supply in northwest Europe will exceed 1 million bbl/d, while demand will remain close to the current 600,000 bbl/d,” Wood Mackenzie said.
The consultancy believes that most of the presalt crude will flow to Asia, instead of the U.S. Gulf Coast—a “natural fit for presalt crude”—due to oversupplied U.S. refineries as well as competition with U.S. producers and imports from Canada, Mexico, Venezuela, the Middle East and West Africa.
“As new supply from North America fills U.S. refineries, Brazilian presalt crude will look to Europe. However, it will end up competing with Norway's Johan Sverdrup field, which dominates North Sea production after 2020—one of the largest oil discoveries ever made on the Norwegian shelf,” Wood Mackenzie said.
“As a result, we believe over 1 million bbl/d of presalt crude will flow to Asia by 2025,” said Gordon McManus, research director EMEARC refining and oil product markets at Wood Mackenzie. “Asian markets are under-served by heavy crude, and their demand is expected to rise.”
Whether the Asian region favors Norwegian oil over Brazil presalt oil will depend on several factors, most notably refined product pricing.
“We expect presalt Brazil and Johan Sverdrup will trade at a 3-4% discount to Brent. Medium and heavy crude discounts to Brent are likely to widen when this heavier supply peaks—benefitting complex refiners,” said Gail Anderson, principal analyst upstream oil and gas at Wood Mackenzie. “In turn, this would make the Atlantic basin less attractive to Urals and medium Middle Eastern grades which could be diverted east.”
Contact the author, Velda Addison, at vaddison@hartenergy.com.
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